11.04.2025 Corruption Cybercrimes Investigations

Mikhail Fedorov: the failure of the “Army of Drones”, the disappearance of 600 million for the Armed Forces and lobbying of the Russian gambling business

Mykhailo Fedorov is the Deputy Prime Minister and Minister of Digital Transformation of Ukraine, who has become a symbol of the country’s ambitious digitalization with projects like Diia and the Army of Drones. Young and progressive, he promised transparency and support for the Armed Forces, but his name is increasingly associated with scandals: from dubious financial schemes to lobbying for gambling businesses with a Russian trace.

Either through ignorance or conscious choice, Fedorov has found himself at the epicenter of events that cause anger and frustration among Ukrainians, especially in the context of the war with Russia.

It all started with Diia, which was supposed to make life easier, but a percentage of payments ended up in the pockets of a company associated with Pin-Up Casino and its Russian founders. Then there is the failure of the Army of Drones, where the Ministry of Digital Transformation overpaid almost UAH 600 million for drones to a company with a capital of UAH 765. And now, PlayCity, a new agency under Fedorov’s control that will regulate gambling, where companies with Russian capital and billion-dollar deals are thriving.

Read more about each case below.

The Diia payment system and its supplier with a Russian trace

According to the Ministry of Digital Transformation of Ukraine, the Diia app uses processing functionality to enable online payments through the Diia app. According to the law, this processing must be provided by a third party, a financial company, as the Diia portal itself is not authorized to carry out payment transactions.

Processing is a technology for automatically processing non-cash transactions when funds are transferred from the user to the recipient’s accounts. For example, you can use Diia to pay fines, unified social tax, debts under enforcement proceedings, and even buy military bonds or support the Armed Forces through UNITED24.

The company that secures these payments is United Space Financial Company LLC, and it receives a commission of 1.5% to 2.2% of each transaction. In 2022, more than 2.7 million online payments were made through Diia, and in 2023 – more than 1.5 million.

By the way, the owner of FC Yedynyi Prostir LLC is Ihor Zotko, who is also the founder of Ukr Game Technology LLC, a company that has received a license to organize and conduct online gambling. The same company operates the popular online casino Pin-Up.ua.

Zotko is also the Chief Operating Officer of Pin-Up.ua. These facts raise questions about possible conflicts of interest. How can a company that processes payments for government services be connected to the illegal gambling industry, which also has a Russian trace?

Interestingly, in January 2023, Pin-Up changed its name to Tranitadevelopment LLC, founded by Marina Ilyina (a native of Luhansk, living in Russia), who has close ties to a company involved in coal imports from Russia to Ukraine.

According to Pin-Up Ukraine, the company did not have any business relations with Russia or its residents at the time of registration in Ukraine. Nevertheless, research into the connections of the company’s founders leaves no doubt that the issue of the potential influence of Russia on the Ukrainian gambling market still requires a thorough investigation.

According to Opendatabot, in 2022, the revenue of FC United Space LLC amounted to UAH 25.3 million. The company’s net profit for the same period increased from UAH 428 thousand to UAH 2.7 million. However, the Ministry of Digital Transformation did not provide information on how much of this income the company received from payments through Diia. So, they are afraid of publicity and bringing to the public’s attention the real figures that Ukrainians pay when generating fines in Diia?

How the state overpaid for drones purchased from a company with minimal capital

Kryon-M, commissioned by the Ministry of Digital Transformation, supplied drones to the State Service for Special Communications and Information Protection at inflated prices as part of the Army of Drones project.

Let’s start from the beginning. “Kryon-M is a company with a meager authorized capital of UAH 765 that specializes in the sale of furniture, carpets, and lamps. The company’s office is located in the private sector on the outskirts of Kryvyi Rih. The head and beneficiary is 43-year-old Maksym Sazhnev, who also has a sole proprietorship in architecture and a real estate rental company, TERRA NOVA KR. Suddenly, last year, this company started selling drones to the State Service for Special Communications and Information Protection.

It should be noted that no transparent tender for the supply of drones was held. Only those companies that were invited to cooperate by the State Service for Special Communications and Information Protection submitted proposals.

In July 2023, Kryon-M signed two contracts for the supply of drones to the state. The first contract was signed in May of the same year for the supply of 1074 drones, and the second in August, with the condition of supplying another 1912 drones. The total amount of the contracts was almost one and a half billion hryvnias. However, the prices for the drones were exorbitant – 500 thousand hryvnias per unit, although the same model could be bought for half that price.

After some time, under additional agreements, the prices for drones were reduced. This could have been done to hide the overpricing in order to avoid violating the new government decree.

At the same time, the cost of Kryon-M drones at a reduced price (UAH 359 thousand and UAH 393 thousand) still exceeds the market offers by several hundred thousand hryvnias. At the same time, if the state had purchased drones from Flytechnology or other more affordable suppliers, it could have saved about UAH 600 million.

PlayCity: who will regulate the gambling industry in Ukraine?

On March 21, 2025, the Cabinet of Ministers of Ukraine established the state agency of Ukraine PlayCity, which will implement state policy in the field of organizing and conducting gambling and lottery.

At the same time, the Ministry of Digital Transformation has been entrusted with the functions of ensuring the formation and implementation of state policy in the field of organizing and conducting gambling and lottery instead of the liquidated KRAIL.

Accordingly, PlayCity activities are now coordinated through the Deputy Prime Minister – Minister of Digital Transformation Mykhailo Fedorov. Thus, the latter has received a wide range of powers, and with them a field for fraud.

In this regard, it is worth recalling the current situation in the gambling market:

  • Vbet remains on the market, despite being suspected of money laundering and ties to Russian capital. Moreover, despite the initial seizure of the company’s accounts, the court decided that the ties to Russia were not a problem, and the seizure was lifted.

The casino has been linked to the “King of Duty Free smuggling,” Arthur Granz. By the way, Alexander Blokhin, the director of Vbet, recently went to court to deny the connection with Granz, calling it a negative for his reputation.

Favbet, the company of Andriy Matyukha, not only remained in the market but also improved its position after the fall of the former leaders. At the same time, it continues to withdraw billions to Russia through the Diamond Pay payment system under its control.

  • Cosmolot is a company actually owned by Russians, although it is formally owned by a citizen of Ukraine and the UK. It is also known that the BES exposed the Cosmolot casino operator for withdrawing 1.2 billion hryvnias to foreign accounts and tax evasion of 30.2 million.
  • The Volna 4444 network has captured a significant part of the Ukrainian gambling market. Its activities are probably “covered” by law enforcement agencies for bribes that reach $10,000 monthly.
  • Casino 777 – the owner of the casino has a controversial reputation. Its “sister” casino Slotoking probably operated in Russia, as its ads appeared in the Russian-language segment in 2012. At the same time, the Ukrainian website lists 2014 as the first year of operation, when gambling was banned in Ukraine.
  • TECHIIA Holding – owners Oleg Krot and Yuriy Lazebnikov lobbied for the interests of the Russian 1XBET, which was promised a green corridor in Ukraine for 40 million. In addition, Krot is under investigation in the proceedings opened on the facts of fraudulent acquisition of $35 million from the Brazilian investor Fusiami.

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